A servicing advance is a measure taken by a servicer to cover any defaulted loan principal and interest payments until the loan is current or it is paid off. The company stated that, as of June 30th, 2020, it had $552 million in cash and restricted cash, equating to a liquidity growth of approximately $26 million since March 31st, 2020. Furthermore, Ocwen has over $1.2 billion of additional liquidity sources that could potentially be tapped into.
The company noted that despite the surge in mortgage delinquency rates due to the ongoing COVID-19 pandemic, Ocwen has had no material adverse change year over year with respect to payment status across its primary and subserviced loan portfolios. Consequently, the company has not experienced significant servicing advances as of yet. However, if the economic impact of the pandemic continues to adversely affect borrowers’ ability to pay, then a surge in servicing advances is likely to follow.
In order to prepare for such an eventuality, Ocwen has taken certain measures to ensure the company has sufficient liquidity reserves in the coming weeks and months. These measures include a series of cost-saving actions and continued efficiency initiatives, such as reducing staff levels on a temporary basis. Additionally, the company has further reduced borrowing costs by refinancing debt, something which helped to decrease the amount of cash needed from the servicing advances. Finally, Ocwen also has access to certain revolving credit arrangements that can provide additional financial resources if needed.
Although Ocwen is prepared to respond to increased servicing advances, the company is still concerned about the potential long-term impacts that the pandemic might have on its business. With a more prolonged economic downturn, Ocwen could face decreased servicing income and higher costs associated with maintaining and servicing delinquent loans. As such, the company will continue to monitor the situation and adjust its strategies accordingly in order to ensure sufficient liquidity and mitigate potential losses.
In summary, Ocwen Financial Corporation is taking a proactive approach to addressing potential revenue losses caused by servicing advances due to the COVID-19 pandemic. As of June 30th, 2020, the company has total cash and restricted cash of $552 Million, as well as over $1.2 billion of additional liquidity sources that can be accessed if necessary. To ensure adequate liquidity levels, the company is taking several cost-saving actions and engaging in efficiency initiatives. Additionally, the company has access to certain revolving credit arrangements that can provide additional financial resources if needed. The company is monitoring the situation closely and is prepared to adjust strategies if needed to ensure sufficient liquidity and mitigate potential losses.
This article was contributed on Nov 30, 2023
